Archive for September, 2010

This is the step-by-step overview of how to get started in the Internet cafe sweepstakes industry. It’s long but it covers it all. Rome wasn’t built in a day, and an Internet cafe can’t be opened in “3 easy steps”. There’s just a lot to cover. If you’re seriously considering jumping into this industry, keep reading.

I want to get started.What do I do first? What are the next steps? What does the process look like and how much is it going to cost me?

First of all let’s be clear–there are a number of companies in this industry who will be fighting over your business. A few of those companies offer strong, legitimate products and a handful are “mediocre”. The majority of the sweepstakes software products on the market are simply terrible. Unfortunately, some of the junky products are represented by smooth-talking salesmen eager to separate you from your wallet. Be sure to use common sense as you do your homework and avoid sweepstakes scams.

It’s not rocket science to put together a software application that looks like a slot machine and attach a “sweepstakes” label to the front of it. However, creating a legal, well-balanced, beautiful sweepstakes promotional platform that makes money doesn’t happen overnight. Once this is done you must get the sweepstakes software certified by an authorized third party or many law enforcement agencies will not recognize it as a legitimate sweepstakes. For this reason you’ll want to avoid most of the sweepstakes you’ll find advertised on Google.

The first thing anyone considering getting into the sweepstakes business should do is do your homework.Do you know what this business is? Have you visited a sweepstakes Internet cafe? Start by read through our site (especially the FAQ section, the Services section, and the entire Sweeptalk section). Step 1:Do some research!

Next, visit a sweepstakes Internet cafe to play the games. Sometimes people call us wanting us to explain the business. The first question we ask is have you ever seen one? Trying to understand this business without ever seeing it in action is extremely difficult. You should definitely visit one–especially if you’re considering investing a lot of of time in the sweepstakes business. Explaining the concept to someone who has never seen it is like trying to explain what chocolate ice cream tastes like to someone who has never tasted ice cream. Step 2:go get a bowl and dig in!

Now that you have an idea of what the business is all about, two fundamental questions are How much money can I make in this business? and how much does it cost to get started? Obviously the answers vary wildly, but here are a few quick, specific answers.

Revenue from a sweepstakes Internet cafe that is: a) using a good sweepstakes software, b) in a good location, and c) run properly will bring in at least $1,000 per terminal (computer) per month. We have clients making 10x this much, but this is a good benchmark. NOTE: Don’t assume that all sweepstakes games will do this well–many of them are absolutely terrible; nobody will play them and could lose the entire investment. The Internet cafe sweepstakes industry is not for the squeamish. Be smart, be careful, and try to find someone you can trust. That’s why we’re here.

Startup costs also vary tremendously depending mainly upon the size of your business (how many systems) and the sweepstakes promotional product you select (which games). Our favorite products on the market currently range from about $400 to $700 per station. So if you’re opening a sweepstakes Internet cafe with 20 stations your total cost for computers is about $8k. Of course, there should be NO UPFRONT COST for the sweepstakes software. Some sweepstakes companies may try to charge you something for the sweepstakes software upfront – but we are highly skeptical of any company that does that. They will make their money once your business is running. Why should they try to charge you for it before that point? Sweepstakes software companies should make their money when you make your money and not a moment before that.

Other than the technical solution, hardware and software, the only other significant expenses are leasing or buying the location and getting it ready. “Getting the place” may require first and last month’s rent–count on spending at least a few thousand dollars on this. Preparing the commercial property for business can include: painting, carpeting, lighting, decor, electrical work, networking, building counters or buying tables, getting chairs, getting a front desk, and sometimes even some construction work (if you need to add a bathroom, for example). For a typical location of about 2,000 sq ft, total site preparation for 30 stations could be about $5-$10k. You can bring this price down by doing some of the work yourself instead of hiring it out to local contractors.

Thus, opening a standard Internet cafe sweepstakes business with 30 player stations (including renting a place, paying for the buildout and site preparation, and purchasing the sweepstakes systems) would probably cost between $15k – $25k. The biggest variable here is the cost of getting the location and building it out. If you already own the location and it requires little or no buildout costs this cost could be as low as about $12k – $15k.

For a quick look at some of the projects we have completed, check out our image gallery.

Now that you have done research to understand the Internet cafe sweepstakes business, you have visited one, and you have an idea of the potential REVENUE associated with the business and the COSTS involved, you can make an educated decision about whether or not you want to launch the business. If your decision is YES, keep reading.

Next steps:You’re ready to get started. Now what?

Ask permission, not forgiveness. This is contrary to the popular phrase–but you can never be too safe in this industry. We don’t care if you’re absolutely sure it will be okay, or if there are already three of them in your town so “one more won’t hurt”. Always, always ask. Go to the city or the county licensing office. Ask to get a business license and tell them you want to open an Internet cafe with sweepstakes promotions. If they ask what it is, tell them. Our clients sell all kinds of products, but the most common is Internet time and running promotional sweepstakes to increase product sales. Make sure you have an OKAY from the local authorities before moving forward with anything.

You may even consider scheduling a quick meeting with the local law enforcement (Sheriff or Police) to give them a “heads up”. This is a delicate matter. You’re not asking permission of the Sheriff because it’s not up to him to interpret the laws. It’s up to him to enforce the laws. So once you already have approval of the city/county for your business, the meeting with law enforcement would be more of an “FYI”. Essentially you’d be saying “We have approval, we’re excited to be opening our new business in your community. Thanks for protecting us. We’d love to have some of your officers over to give them a tour and maybe have an activity at a discount, etc.” You get the point, this is a public relations meeting, not a “can we get approval” meeting.

A word to the wise–if the local authorities or law enforcement tell you they’re not okay with the business model it’s much easier to pack up and find another city or county than to try to prove to them why it should be okay (or worse, opening without permission and picking a fight). Moving your proposed spot could take a few days. Going through the process of proving that it’s okay once the authorities have told you they don’t like it could easily take 6 months – a year and cost a fortune.

Find a location. Look for a place near your customers. Lower to middle income spots are great. Strip malls are great. The kinds of businesses you may want to be near include Wal-Mart, check cashing businesses, pawn shops, maybe slightly seedy but still safe. The elderly frequently love Internet cafes as well because the concept is very similar to BINGO. They’ll come not to “win big” but to spend $10 or $20 to be entertained for a few hours. High traffic areas are good. High visibility and accessibility is good.

How much space will you need? A good rule of thumb is to get about 50 square feet per computer. Thus, 1,200-2,000 sq ft would be great for a 30-system business with room to grow.

NOTE: Some of our distributors or clients employ a slightly different model. Rather than opening one large store with 20+ sweepstakes machines, they place a few of them (usually 2-6) in a business that is already open. This setup can be placed in convenience stores, bars, laundry mats, or other high-traffic areas and can be a very lucrative model. For more information, watch the video on the front page of our website that describes “sweepstakes kiosks” or “Totems”, and read the articles on our site about Totems. If you’re interested in doing something like this let us know and we can discuss.

Talk to the landlord (or the commercial leasing agency). Some will be perfectly fine with the idea. Some will not. Again, if they don’t like what you’re doing it’s much easier to move on than to engage in an argument and try to prove to them why it’s okay. Trust us on this.

While you’re working on finding a location, figure out which games (sweepstakes system) you’ll be using. This is perhaps the most critical decision of all. At this phase it would be very helpful to have input from a trusted industry expert. Search the Internet, compare sweepstakes companies, call people, and learn everything you can about the industry to make an intelligent decision. Be sure to find a company that uses legally certified sweepstakes and one that answers its phones.

NOTE:Someone who works in a sweepstakes store will likely be an expert on one product but have no experience with any other kind of sweepstakes software. Going back to our ice cream example; this would be like asking someone who has only eaten chocolate ice cream which flavor of ice cream is the best. “I LOVE CHOCOLATE!” Take it for what it’s worth.

Speaking with salesmen for specific products can be informational and can’t hurt. Of course, they’re all going to tell you why their product is the best. A real strength of SweepsCoach is that we can discuss strengths and weaknesses of many of the different products because we have actually used them in Internet cafes. We’ve seen them all in action, we’ve helped our clients set up, install (and uninstall) dozens of different sweepstakes products and we’re happy to give you the lowdown. For more information on our background, check out the Services, the About section of our site.

There are many, many kinds of sweepstakes products. We are familiar with just about all of them and have worked with most of them first hand. We know which companies are making money and which are not. This is because we get phone calls all day long from people who are using the different games. Many are switching from one sweepstakes software to another because those they are using aren’t very good and they’re not making money. You don’t want those games. We have a very short list of games that are working well for people. Which games are making the most money? Give us a call and we’ll give you our professional opinion of the top 2-3 options in your area–which are the best and why.

Sometimes the best sweepstakes solution may not be as obvious as you think. Keep in mind that no sweepstakes software company will tell you about their weaknesses. Are their games good? Is the math model they use in their games good? Is their technical support good? Will they protect the area and not let someone else open with the same software right across the street from you? Will they add on bonus, surprise expenses once you’re already open (and threaten to turn off your games if you don’t pay?) There’s a lot to think about!

Ironically, some of the busiest games are popular because they pay out TOO MUCH. This means that the customers love the games because they keep winning but the business owners are paying out at slightly greater than 100%. The busier the sweepstakes store is, the more money the business owners lose. We have received a number of calls from people using sweepstakes software with this problem. Who would have guessed? Using this sleazy tactic, some sweepstakes software companies makes a fortune on licensing fees. In this case the sweepstakes manufacture is raking it in–at the expense of the business owner who is slowly losing his shirt.

There are dozens of sweepstakes gaming companies but only a small handful that are are really working for business owners. Contact us and we’ll give you our honest opinion on who’s who out there. Then you can make an informed decision about which sweepstakes product makes the most sense for you.

Now that you understand the business, you’ve asked permission of the local authorities, found a perfect location and selected a promotional sweepstakes solution, what’s next?

Buildout and Marketing. When you get to this point we’ll be happy to hold your hand through the process. Carpeting, painting, lighting, decor, counters, tables, or cabinets for the sweepstakes systems, chairs, electrical work, networking, Internet connection… This stuff is all in a day’s work for us. You’ll also start spreading the word that your business is coming so that when you open the doors your customers will be waiting for you. Don’t assume that “if you build it, they will come”.

While you’re busy with these projects we’ll be working on two things. First we’ll be coaching you through the buildout and marketing, and second we’ll be getting the sweepstakes technology solution put together for you. It usually takes the same amount of time for our technical group to get the systems assembled and ready to go as it does for you to get the onsite preparation completed. We’ll coordinate our efforts so that by the time you’re cleaning up the paint and sawdust, your sweepstakes systems will be showing up and you’ll be ready for installation and training. This process should take a few weeks.

You’re open! Finally the business is ready to go, the place is all set up and smells of fresh paint, the new sweepstakes systems are installed and your employees are trained. You’re exhausted but it’s all worth it because here come the customers!

When people are getting started in the business of using sweepstakes promotions they frequently misunderstand one of the most critical principles of this business. What are you selling? If your answer is “Sweepstakes Entries”, you are wrong–dangerously wrong. Do not pass go, do not collect $200.

This common misunderstanding goes against the very definition of sweepstakes. A sweepstakes is used as a marketing tool to promote a product. No true sweepstakes will allow a customer to buy sweepstakes entries. If it does allow this, the sweepstakes sponsor can expect serious legal trouble sooner or later because it is not really a sweepstakes; it is GAMBLING.

The sweepstakes sponsor sells something else, a PRODUCT, and uses sweepstakes to encourage sales of that product. Let’s look at Coca-Cola. When you buy a bottle of Coke and find a number on the bottom of the cap, you can enter that number into an online sweepstakes form to determine whether or not you have won. The product, in this case, is Coke. Coca-Cola did NOT sell you a sweepstakes entry for $1.25. They sold you about 1 cent worth of carbonated water, sugar, and flavoring and 19 cents worth of packaging and shipping for $1.25 (this is a bottle of Coke). In order to encourage you to buy their product instead of a competing product they used a sweepstakes promotion. This marketing tool is designed to entice customers to buy the product, but the product is never, EVER, the sweepstakes entry.

So let’s ask that question again. What are you selling?

Our Internet kiosks, as the name implies, sell Internet access and the use of a touch-screen computer terminal. Thus, when a customer buys $10 worth of Internet time he will receive a number of free entries into the promotional sweepstakes. In the case of the sweepstakes promotion running on our Internet kiosks, the PRODUCT (Internet access) is being sold and the SWEEPSTAKES ENTRIES are being given out for free. The difference is subtle but critical.

It is fundamentally important that you as a sweepstakes sponsor and all of your employees understand this. More than one Internet cafe has landed in hot water because an undertrained or lazy employee told a customer (who happened to be an undercover law enforcement officer) that they were selling sweepstakes entries instead of selling some other product and then getting the sweepstakes entries for free. Don’t make this mistake and don’t let your employees make it.

The line between PRODUCT and PROMOTION blurs when we’re selling an intangible product such as Internet access time. In every case the product must be kept separate from the promotion. Specifically, if you sell Internet time and then give away sweepstakes entries to people who purchase that Internet time, using the Internet time cannot consume the sweepstakes entries. Alternatively, using the sweepstakes entries should not get rid of the time you have purchased to access the Internet. The Product and the Sweepstakes Promotion must always be kept separate.

For clarification and simplification, let’s bring this back to a model that uses a tangible product. When you buy a Quarter Pounder with Cheese at McDonald’s and get a Monopoly sweepstakes game token, eating the burger will not make your Monopoly sweepstakes game piece disappear. And revealing (or redeeming) that game piece will not make your hamburger disappear. Furthermore, if your Monopoly sweepstakes entry (which you have not yet revealed) is a $1 million grand prize, the value of that prize will not (and should not) decrease as you eat your burger. The same rules apply to any product that is promoted by a sweepstakes, whether it be cheeseburgers, Internet time, or anything else.

Sweepstakes are a fantastic marketing tool. As you begin to promote your products with sweepstakes, you must understand exactly what you’re selling. Sweepstakes Promotion is a marketing tool used to help increase sales of that product. You are selling a PRODUCT, which will NEVER be “sweepstakes entries”. Good luck with your product sales, good luck with your sweepstakes promotions, and feel free to contact us if you have any questions.